The Chinese central government State Council has outlined a series of policies to improve credit availability for small companies. A statement from a meeting chaired by Premier Li Keqiang said the government will work to keep sufficient liquidity in the money market, to ensure financial stability and ensure the economy grows within a reasonable range. Ying Junyi has more.  

A series of fiscal, tax and financial incentives were approved at the meeting to encourage financial institutions to provide needed capital to small businesses. Selected banks will be allowed to cut their reserve requirement ratios and reduce some lending rates for small firms and agricultural businesses.

JIMMY ZHU, CHIEF STRATEGIST FULLETON MARKETS "Regarding the target based RRR cut, we think it will have more positive impact to on the bond market than the stock market. The type of the bonds that will outperform the other bonds, we think will be the interest rate bonds, and also the high ranking investment bonds, corporate bonds. The stock market, we think the property sector will continue to outperform to the rest of the stocks giving the policymakers are willing to ease the monetary policy. For the yuan side, the likelihood of the shrinking of the US and China ten-year bond may add downward pressure on the Chinese yuan. We think the PBOC might continue to set the yuan fixing to maintain the yuan flexibility. So most likely, the dollar will continue to outperform, yuan will rise against a basket of currencies."

Zhu believes the new moves easing financial strains on small businesses are designed to tackle side effects from the ongoing deleveraging campaign. Total social financing, China's broadest measure of credit, posted its smallest monthly growth since July 2016 in May, reflecting significant declines in shadow banking instruments such as trust loans, entrusted loans and undiscounted bankers' acceptances. Earlier this month, the central bank expanded the kinds of collateral it accepts for its medium-term lending facility, a move also aimed at helping businesses, particularly those in targeted sectors, gain more access to financing.